The two parts of action

The first part has to do with learning, and arguably nowadays we are in the perfect context to get to know what needs to be done. Information has never been more available, there is a “five-step” list to get to do almost everything one can think of, education and peer-to-peer sharing of experiences is facilitated like never before.

The second part, on the other hand, has never been so difficult. It is where 99.9% of us fail.

Investing and the stock market is the perfect example for this. There’s a beautiful lesson by Howard Marks, co-founder of Oaktree Capital, in one of the latest Motley Fool Money podcast (interview starts around 18:50). To summarise it:

Stocks return 9-10% a year on average. We know that. Yet they rarely return between 8 and 12% in any single year. The average is not the norm. Why is that? It’s because of emotional excesses. To the upsides, that then require corrections, and to the downsides. If you think about the value of a company in a 60-year time frame, that is not impacted by what happens day-to-day, week-to-week, month-to-month, year-to-year. It is pretty stable. The changes in earnings in one quarter is not really important. But people react excessively to these things.

Howard Marks

Nobody wants us to be emotionless robot, yet if we set out to do something important to us, this is a lesson that is better to keep in mind.